Police union agrees to greater pension contributions

Newport council still must formally approve the deal, which also adds pay raises and better health benefits, during Tuesday's meeting.

June 25, 2012|By Mike Reicher

The police officers' union has agreed to a new two-year contract that would increase pension contributions while getting pay raises and better health benefits, Newport Beach officials announced.

The City Council, however, still has to formally approve the Newport Beach Police Assn.'s contract during its Tuesday meeting.

Although the city's finances are exceptionally strong, Newport has one of the county's largest unfunded pension liabilities per capita. Officials have sought to rein in pension benefits in all union contracts, and the Police Department's personnel budget is the largest.

Negotiations lasted nearly 10 months, as union leaders sought concessions for proposed reforms that would dig into their paychecks.

"The bottom line is their purchasing power is not keeping up," City Manager Dave Kiff said Monday, explaining why the city was willing to balance the cuts.

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Currently, the city pays about 90% of a typical police officer's retirement fund, while under the new contract it would pay about 75%, with the employee making up the rest. The contract caps an employee's contribution at 26.5%.

In practical terms, a police officer making $84,000 per year would get a $6,000 annual pay raise, but would pay an additional $8,000 toward retirement, according to a city example.

A city financial analysis shows that the city will actually spend about $205,000 more over the next two years compared with the previous terms. But in the long run, officials expect to save because new hires will get a less generous retirement plan and because the city will calculate current employees' pensions differently.

Currently, the city counts some of its retirement payments toward employee compensation, thus inflating the final salary number used in pension calculations. That practice would end.

A representative from the Police Assn. could not be reached for comment Monday.

As an added benefit, the city will increase its medical insurance contribution by $200 per month per officer, from $1,124 to $1,324. It also establishes a medical trust of $100 per month per employee, which will be set aside to pay for health care in retirement.

In the new contract, the pension plan for new officers will allow them to retire at age 55 with up to 90% of their salary, while current officers can retire at 50 with up to 90% of salary. Union officials were concerned that less-generous benefits could hinder recruitment, but cities throughout the state are converting to such plans.

Civilian police employees also agreed to pick up more of their pension costs.